External Refurbishment process for Repairable Spares with Serial number

Integration

Summary
This document helps MM consultants to understand the way in which the external refurbishment process can be
mapped with the Integration of Subcontracting Purchase Order, Split Valuation and Serial Number to handle the
complete cycle of refurbishment and track the material in system with entire history of material movements for the
particular serialized material

Refurbishment for Repairable Spares

The refurbishment of repairable spares is important for industries like process industries, mass production, etc.
where the resources availability is of utmost importance & any downtime due to the equipment or system failure
may run into huge losses. In such kind of industries, the key components of equipment / production system are
maintained at high availability (often referred to spare parts) whereby upon failure of the equipment, the faulty
spare part from this equipment can be replaced by a new / working spare part already in stock, so that the
equipment can be started again.

Later, this faulty spare part can be refurbished again (by internal maintenance team or through an external
refurbishment vendor) & can be re-used.

External Refurbishment for Repairable Spares

In the below scenario taken up ahead, we will go through the case, when the refurbishment has to be performed
completely by an external vendor and the Inventory will be managed in the Spares Warehouse

Process Flow
The following graphic provides an overview of External Refurbishment for repairable spares taken for this
illustration:
Referring the above flow process, whenever the Maintenance department comes across a breakdown, it
identifies the spare part that has been damaged & it immediately replaces this faulty spare part with a new /
usable spare part (in working condition), so that the system is restored.

This movement of Spare part between the internal maintenance / user department, External Supplier &
External refurbishing contractor is highlighted by the terms – NEW, DEFECTIVE and REFURBISHED to indicate
the condition under which the spare part moves from one area to another.

External Supplier supplies the spare part in the NEW state. When the spare parts renders useless & cannot
function anymore, it is returned back to the Warehouse as a DEFECTIVE component. Later this DEFECTIVE
spare part is send to external refurbishing contractor for repair & once completed, it is sent to the Warehouse as
a REFURBISHED spare part. Meanwhile the Maintenance department is satisfied by the supply of another
functional spare part from the Warehouse, so that there is no stoppage due to non-availability of spare item.
Later for repairable spare item that cannot be further refurbished, it can be posted for scrapping.

In all these cycles, that happen on a particular spare part item, it is of vital importance to know at any time the
number of refurbishments performed on a given individual spare part item, so as to enable to do proper
planning of maintaining the adequate inventory in Warehouse for avoiding any resultant down times due to
unavailability of a functional spare part at any given time.

The above cycle will be explained in the Demonstration section below, for the scenario considered in this
illustration.

Business Scenario
In the scenario taken up for illustration here, the Repairable spare items are managed by the Spare Parts
Warehouse.

Spare Parts Warehouse receives material at the time of initial procurement & then issues the material against
the reservation to the Maintenance / user department. The Issued repairable spare part material is used in the
Plant and when its usability ends, it is sent back to Warehouse for refurbishment by external vendor. The
warehouse does a receipt of this part (return to warehouse) & then creates a requisition for its external
refurbishment and replaces this part with another part of the same material from stock, if any, which can be
used by Maintenance for the time being. After the refurbishment is completed, the refurbished material is
received back in stock by Warehouse.

The usability of the Repairable spare part item needs to be bifurcated in system based on one of the 3 states of
the material as shown below:

NEW (when the material is purchased from the vendor initially and is in unused state)

DEFECTIVE (when the material is returned to Warehouse by Maintenance/user dept., after its usability ends)

REFURBISHED (when the material is received from the external refurbishing vendor, after refurbishment)

Also, the value of material in a NEW state will be more as compared to one in REFURBISHED state or in
DEFECTIVE state, which will have bare minimum value, which can be priced based on the business requirement

This bifurcation needs be reflected in the Stock of Spare Parts Warehouse along with the unique tracking /
identification for the individual Repairable Spare part item of the same material

Approach
The given business scenario can be managed by using Subcontracting for external Refurbishment, combined
with Split Valuation for the repairable spare parts & serialization for each part’s individual tracking

3 valuation types created under a new valuation category based on the Condition of the material, they are:

NEW (when the material is purchased from the vendor initially and is in unused state)
DEFECTIVE (when the material is returned to Warehouse by Maintenance/user dept., after its usability ends)

REFURBISHD (when the material is received from the external refurbishing vendor, after refurbishment)

For ease of accounting, it was decided that the DEFECTIVE material should always have a zero value (price
control given as standard price), whereas REFURBISHD material will take the price of the Refurbishment and
the components consumed in the refurbishment process, hence moving average price control assigned to other
2 valuation types

Further pre-requisites are explained below

Pre-requisites
• A material master record must be created in the system for the repairable spare part
• Split Valuation is activated bifurcation of repairable spare part based on its state / condition
• Unique identification is only possible if the individual pieces of material have been serialized
• You have installed DIMP 6.0, activated the business function Refurbishment and Subcontracting
(LOG_EAM_ROTSUB), Refurbishment and Subcontracting 2 (LOG_EAM_ROTSUB_2) and Serial Numbers
in Purchasing (LOG_MM_SERNO)

System Configuration Overview:

Configuration for Split Valuation

Below are some configuration settings required for using the Split Valuation for the Material based on its State /
Condition viz. NEW, DEFECTIVE or REFURBISHED. The snap shots are self-explanatory.

• Configuration:

• Activation of Split Valuation:

• Defining Valuation types:
• Defining Valuation Category:
• Assigning Types to Category:
• Assigning Category to Organization unit:
Configuration for Serialization

We will use the existing standard Serial number profile without any changes
Configuration for Subcontracting

No Specific configuration required for Subcontracting, as we will be using the standard subcontracting process
without delivery

Configuration for Material Provision Indicators

Material Provision Indicators for Rework “S” will be used in the components for the scenario illustrated, based
on the Subcontracting Type selected in the purchase requisition
Demonstration for the Approach:
Material Master Extension for Valuation Types

The material master of the Repairable spare part needs to be extended to the new valuation types created viz.
NEW, DEFECTIVE and REFURBISHED.

• Serial number assignment needs to be done in the Material (Test material created for Demo)

• Valuation Category “M” entered in the Test Materia

• Extending the Test Material to all the 3 valuation types, one by one